Private bankers’ Asian pay surge poised to slow

“I haven’t seen a slowdown in compensation increases so far,
but it will slow given the global state of the private banking business,”
Eduardo Leemann, who runs the Zurich-based firm, said in an interview
yesterday.

“You’ll see some slowdown by the end of 2011. In 2012 and
2013, we’re unlikely to see the 20 to 30 percent growth seen in Asian
relationship managers’ compensation pay.”

Falcon and rivals including UBS AG and JPMorgan Chase &
Co are competing to hire bankers and managers in Asia, where wealth outside of
Japan over the next five years is expected to rise almost twice as fast as the
global rate of almost 6 percent, according to Boston Consulting Group. While
Leemann plans to boost his Asian headcount, industrywide margin pressures will
make managing personnel costs a priority, he said.

Before the global financial crisis, costs for private
bankers in the Asia-Pacific region, including salaries, were about 57 percent
of the revenue they generated in 2007, according to PricewaterhouseCoopers.
This year, cost-to- income ratios are forecast to be 82 percent in Singapore
and Hong Kong, and about 70 percent in Switzerland, the firm said.

“Our clients have become more conservative since 2009,”
Leemann said. “The bad news is that they are holding more cash and high-quality
bonds now, meaning that the margins are less. The good news is they are much
better prepared in the recent financial crisis when compared to the one in
2008.”

Average pretax profit margin of wealth managers increased 4
basis points last year to 23 basis points while growth in assets under
management slowed to 7.5 percent from 12.8 percent in 2009, according to Boston
Consulting’s 2011 global wealth report covering private banks and wealth
management units of banks in Europe; Asia, excluding Japan; North America and
Latin America.

Senior private bankers in Singapore earn between $160,000
and $410,000 a year, while the comparative range in Switzerland is $152,000 to
$210,000, according to London-based recruitment firm EMA Partners
International.

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“It is conceivable that the bigger banks are unlikely to
make this bonus package anymore,” said Leemann, whose firm manages about $12bn in
assets. “Some of our peers are seeing cost-to-income ratios of at least 90
percent in Asia.”

Growth in Asian wealth in recent years has boosted demand
for financial advisory services among the region’s wealthy and driven banks to
step up their presence in Asia, pushing top salaries in Singapore to almost
twice the level of Switzerland, the world’s biggest offshore wealth manager,
according to EMA.

UBS, Switzerland’s largest bank, is expanding regional
headcount by more than 30 percent to 1,200 people, Kathryn Shih, regional head
of wealth management, has said. JPMorgan intends to add 100 workers to the 140
it had in Asia last year, Andrew Cohen, CEO of its wealth management has said.

DBS Group Holdings, Southeast Asia’s largest, said last week
it plans to invest S$250m ($193m) to expand private banking operations over
five years, including hiring in China and other emerging markets.

Falcon, owned by Abu Dhabi’s Aabar Investments, aims to grow
its assets under management worldwide by at least two thirds to $20bn to $25bn in
five years, of which at least $3bn of assets will come from clients in Greater
China without acquisitions, Leemann said.

The lender plans to increase its staff number in Hong Kong
to 50 from 44 by the end of this year and boost its Singapore headcount to 15
from 10, he said. It has 300 employees globally.

“Asia is a huge market with enormous continent,” Leemann
said. “We want to focus on Greater China and that includes China, Taiwan and
Hong Kong.”

Falcon was purchased by state-owned Aabar from American
International Group Inc. in December 2008 after the insurer was forced to sell
assets to repay a US government loan that saved it from bankruptcy. The wealth
manager has branches and representative offices in Geneva, Dubai, Hong Kong and
Singapore.